2021 (8) TMI 1184 - AT - Income Tax

Addition u/s 43CA - Additions made without reference made to valuation officer (DVO) u/s 50C(2) / 50A - difference between the sale value recorded in books and stamp duty value - whether the A.O ought to have acceded to the request of the assessee to refer the dispute in respect of valuation of five (5) flats to the DVO in order to ascertain the fair market value of the property on the date of sale - assessee pleaded before the A.O that invoking blindly the provisions u/s 43CA and making additions based on the deeming provision would cause hardship to the assessee in genuine transfer of flats - HELD THAT - As relying on SUNIL KUMAR AGARWAL 2014 (6) TMI 13 - CALCUTTA HIGH COURT we set aside the order of the Ld. CIT(A) and remand the matter back to the AO with a direction to refer the valuation of flats to DVO for determination of the fair market value as on the date of sale of the property after giving opportunity to the assessee and thereafter to adopt the consideration of five (5) flats in question in accordance to law. Deduction u/s 80IB(10) - whether deduction be allowed on the entire income including any income (if any) determined u/s 43CA - HELD THAT - We find force in the submission of the Ld. AR that if the income/profits from the sale of flats, in question, falls in the eligibility project for claiming deduction 80IB(10) of the Act, then even if there is any enhancement in the income of the assessee by virtue of valuation made by the DVO, then the A.O after examination of this fact should give the benefit of the deduction under Chapter VI-A on the enhanced amount if any, in accordance to law. Taking into consideration the Tribunal s decision in the case of Radhika Sales Corporation 2018 (11) TMI 1788 - ITAT PUNE we are of the opinion that the proviso explaining the tolerance limit has to be read retrospectively, therefore, if the difference between the declared value by the assessee and the value decided by the DVO is less than 10%, no addition is warranted. With the aforesaid observations, the issue raised by the assessee is disposed off and the A.O is directed to assess the income of the assessee as per the directions given.

Summary

Issues Involved:
1. Addition of ?54,88,952/- under Section 43CA of the Income Tax Act, 1961.
2. Non-referral to the Valuation Officer under Section 55A of the Act.
3. Deduction under Section 80IB(10) on the entire income, including any income determined under Section 43CA.
4. Applicability of tolerance limit for valuation differences.

Detailed Analysis:

1. Addition of ?54,88,952/- under Section 43CA:
The assessee filed a return disclosing a total income of ?1,98,39,040/-. The Assessing Officer (A.O.) added ?54,88,952/- under Section 43CA, noting that the sale consideration for five properties was lower than the stamp duty value. The A.O. determined that the sales consideration should be ?2,32,79,552/- instead of ?1,77,90,600/-, leading to the addition of the differential amount of ?54,88,952/-. The CIT(A) confirmed this addition, stating that the properties were sold below the stamp duty valuation rate, and no specific objection was filed by the assessee regarding the adoption of the stamp duty rate as the full value of consideration.

2. Non-referral to the Valuation Officer under Section 55A:
The assessee contended that the market value of the properties was less than the stamp duty value due to a depressed market and requested the A.O. to refer the matter to the Valuation Officer (DVO). The A.O. ignored this request, and the CIT(A) upheld the addition without referring the case to the DVO. The Tribunal referred to the Calcutta High Court decision in Sunil Kr. Agarwal vs. CIT, which mandates that the A.O., being a quasi-judicial authority, should act fairly and refer the matter to the DVO even if the assessee does not explicitly request it. Consequently, the Tribunal remanded the matter back to the A.O. with instructions to refer the valuation of the flats to the DVO.

3. Deduction under Section 80IB(10):
The assessee claimed that the income from the sale of flats was eligible for deduction under Section 80IB of the Act. The Tribunal noted that if the project qualifies for deduction under Section 80IB(10), any enhancement in income due to the DVO's valuation should also be eligible for this deduction. The Tribunal directed the A.O. to examine this aspect and grant the deduction on the enhanced amount, if applicable.

4. Applicability of Tolerance Limit for Valuation Differences:
The Tribunal considered the decision in Radhika Sales Corporation vs. Addl. CIT, which held that if the difference between the declared value and the DVO's value is less than 10%, no addition should be made. The Finance Act 2018 introduced a 5% tolerance limit for variations between the declared sale consideration and the stamp duty value, later increased to 10% by the Finance Act 2020. The Tribunal held that this amendment is retrospective and applies to Section 43CA as well. Therefore, if the difference between the declared value and the DVO's value is less than 10%, no addition is warranted.

Conclusion:
The Tribunal set aside the order of the CIT(A) and remanded the matter back to the A.O. to refer the valuation of the flats to the DVO. The A.O. was also directed to consider the eligibility of the enhanced amount for deduction under Section 80IB(10) and to apply the 10% tolerance limit retrospectively. The appeal was allowed for statistical purposes.